Employer of Record in Japan
Amidst a dynamic population, tradition, and innovation, Japan emerges as a major player, offering incredible opportunities for growing businesses.
However, entering the Japanese professional market can be challenging due to a very specific regulatory framework. Through this page, we assist you in understanding and assimilating the process of wage portage in Japan. This way, we can significantly streamline your growth in Japan, allowing you to leverage the benefits of our services.
What is the Employer of Record service in Japan?
A local entity acts as an intermediary in the employer-employee relationship. Salveo operates as an Employer of Record (EOR), taking on responsibilities for legal and regulatory compliance regarding immigration, employment, and payroll, then invoices the end client in their home country.
As the legal employer, Salveo does not oversee the employee’s role. The original employer retains complete control over substantive aspects of employment, including decisions related to compensation, job specifics, professional development, and contract termination.
EOR in Japan: What are the benefits?
The adoption of wage portage services in Japan offers numerous advantages. This approach allows for the quick establishment of a profitable local presence, bypassing the complexities of creating and managing a local legal framework. Not only does it eliminate potential extended waiting periods, which could stretch up to 6 months, but it also allows for a thorough testing and assessment of the Japanese market potential for your project.
By delegating administrative and regulatory tasks to our service, you are freed up to focus on the core activities of your business. Additionally, a local presence through wage portage services enhances trust with your clientele, acting as a reassuring factor and fostering closer communication, especially within the same time zone.
Our added value in the EOR process in Japan
Salveo, as an Employer of Record (EOR), offers a range of services designed to assist businesses of all sizes in managing their human resources in Japan.
Salveo’s services include:
- Drafting employment contracts in compliance with Japanese labor laws
- Assisting in obtaining work and residence permits for foreign employees
- Processing payroll and issuing pay slips
- Administering social security and income tax
- Managing paid time off
- Reimbursement of professional expenses
- Handling contract terminations (non-renewals or layoffs)
- Collaborating with the client company on all aspects related to labor law and employment contracts
In addition to basic wage portage services, Salveo provides optional services such as recruitment, office spaces in its business centers, and international mobility management services (apartment search, school placements, car rentals, etc.).
For companies considering expansion in Japan or looking to outsource their human resources through an Employer of Record, we highly recommend contacting our experts to explore our comprehensive range of services.
The essential information to consider in the EOR process
Types of employment contracts in Japan
Japan offers two main types of employment contracts :
Types of contract | Probation period | Termination notice period | Severance |
Open-ended contract | 3-6 months | – 0 < days of employment <14: none – days of employment >14: 30 days
| In the event of an employee being terminated without cause, the compensation granted is equivalent to 2 month’s salary per year of service, capped at a maximum of 12 months. |
Fixed-term contract |
Common probation period practice in Japan
While the probationary period is not mandatory, it is a common practice. Usually spanning three to six months and not exceeding one year, this period allows for employee evaluation.
Termination during or at the end of the probationary period is acceptable, provided it is objectively justified. Extending the probationary period is prohibited unless stipulated in the work rules or employment contract.
Working hours and overtime in Japan
In Japan, the standard workweek typically spans from Monday to Friday, with each day comprising an average of 8 hours, amounting to a weekly limit of 40 hours. These hours constitute the norm for full-time employees unless alternative arrangements have been mutually agreed upon with a union or local employee representative. It is imperative that work agreements explicitly specify the maximum allowable hours for overtime.
The overtime rates are as follows:
Overtime Work Hours | Overtime compensation |
On daily working days: – Standard overtime rate – Late night overtime (10pm-5am) |
– 125% of the usual salary rate – 150% of the usual salary rate |
On rest days: – Standard overtime rate – Late night Overtime (10pm-5am) |
– 135% of the usual salary rate – 160% of the usual salary rate |
Overtime work > 60 hours/month | 150% of the usual salary rate |
Late night overtime work > 60 hours/month | 175% of the usual salary rate |
Annual paid leave
For employees with more than six months of service, the entitlement starts at 10 days of paid annual leave. After the second year of seniority, employees are granted an additional two days of paid leave for each subsequent year, reaching a maximum of 20 days per year.
The following table outlines the progressive entitlement to paid annual leave based on the duration of service with the company.
Length of Continuous Service | 6 months | 1st years | 2nd year | 3rd year |
Number of entitled annual leave days | 10 | 11 | 12 | 14 |
National Holidays
Except for New Year’s Day, if a holiday falls on a Sunday in Japan, the subsequent Monday is observed as a public holiday. While there is no legal obligation for employees of foreign companies to have the day off on public holidays, it is a common practice for most employers to provide this benefit.
The following table indicates the Japanese Public holidays and their dates for 2024 :
Holiday | Date |
New Year’s Day | 1st January |
Coming of Age Day | 9th January |
National Foundation Day | 11th February |
Emperor’s Birthday | 23rd February |
Spring equin’s Day | 21st March |
Showa Day | 29th April |
Constitution Day | 3rd May |
Green Day | 4th May |
Children’s Day | 5th May |
Sea Day | 15th July |
Mountain Day | 11th August |
Respect for the Aged Day | 16th September |
Autumnal Equinox Day | 23th September |
Sports Day | 14th October |
Culture Day | 3rd November |
Labor Thanksgiving Day | 23rd November |
Minimum wage
The minimum wage in Japan is set by the prefectural government and varies depending on the region and industry. The following table offers a vision of the hourly minimum wage in different prefectures in Japan:
City | Minimum Hourly wage (¥/hour) |
Tokyo | 1,113 |
Osaka | 964 |
Kyoto | 1,008 |
Yokohama | 1,030 |
Nagoya | 1,025 |
Fukuoka | 992 |
It is important to note that the Japanese government has set a goal of raising the minimum wage to ¥1,000 per hour by 2024. This would be a significant increase, as it would represent a 4% raise in the minimum wage.
Employment contract termination
In Japan, termination laws provide robust legal protection for employees, making it challenging for employers to dismiss employees without justified cause. Termination for reasons that might be acceptable in other countries may not be applicable in Japan, and unjustified termination is considered an abuse of employer rights, resulting in reinstatement with back pay if the employee seeks relief. Therefore, employers often prefer obtaining the employee’s voluntary resignation rather than issuing a termination notice. In certain situations, financial incentives may be provided as a means to encourage employees to voluntarily resign.
Traditionally, Japanese business culture incorporates a 3-6 month probationary period for underperforming employees. If expectations are not met, termination becomes an option without violating Japanese law. Employers must adhere to legal requirements, providing at least 30 days’ notice of termination.
In the event of an employee being terminated without cause, the compensation granted is equivalent to 2 month’s salary per year of service, capped at a maximum of 12 months.
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